Profit margin calculator
Calculate gross and net margin, markup, ROI and break-even price after real selling costs — marketplace fees, payment processing, VAT, returns and advertising.
$3,836.80 a month at 200 units
- Marketplace or platform fee−$7.2012%
- Payment processing−$2.043.4%
- Fulfilment−$6.0010%
- Cost of goods−$18.0030%
- Inbound shipping−$2.003.3%
- Returns (4% rate)−$0.580.96%
- Advertising−$5.008.3%
- Net profitkept$19.1832%
Price needed for a target margin
- 10% net margin$42.44
- 20% net margin$48.96
- 30% net margin$57.85
- 40% net margin$70.68
Solved iteratively, because the percentage fees rise with the price — you cannot just add a markup to cost.
| Step | Working | Result |
|---|---|---|
| Selling price | $60.00 | |
| Marketplace or platform fee | 60.00 × 12% | -$7.20 |
| Payment processing | 60.00 × 2.9% + 0.30 | -$2.04 |
| Fulfilment | -$6.00 | |
| Cost of goods | -$18.00 | |
| Inbound shipping | -$2.00 | |
| Returns at 4%Per return: handling + refund admin + written-off stock + the outbound fulfilment fee you do not get back. | 14.40 × 0.04 | -$0.58 |
| Advertising per unit | -$5.00 | |
| Net profit per unit | 60.00 − 40.82 | $19.18 |
| Net marginMargin is measured against net revenue, so it stays comparable across tax regimes. | 19.18 ÷ 60.00 × 100 | 31.97 % |
| Monthly profit at 200 units | 19.18 × 200 | $3,836.80 |
Step 3 of 4 — I am selling on a marketplace
What is left after the platform takes its cut?
Margin after the costs that actually apply
The profit margin calculator ranking first for this term models cost and markup and nothing else — no marketplace fee, no payment processing, no VAT, no returns. That is fine for a mental estimate and misleading for a pricing decision, because the costs it omits are the ones that move a healthy-looking margin into single digits.
Margin and markup are not the same number
Margin is profit as a share of the selling price. Markup is profit as a share of the cost. A product costing $10 and selling for $20 has a 100% markup and a 50% margin. Confusing them is the most expensive arithmetic error in retail and it always errs the same way: someone targeting a "40% margin" who applies a 40% markup ends up at a 28.6% margin and does not notice until the year-end accounts.
The three deductions people leave out
VAT first: if your price includes it, that portion was never yours. A UK seller treating a £120 inclusive price as £120 of revenue overstates margin by the entire 20%. Returns second: a return costs the outbound postage, the return postage, the handling and often the unit, and at a 10% return rate that is a real deduction on every sale, not an occasional event. Advertising third: if a share of your sales are ad-driven, the blended ad cost belongs against every unit, because the organic sales and the paid ones come out of the same inventory and the same price list.
Questions people ask about this
Answers written from the published rules, not from other people's summaries of them. Every figure quoted below is listed with its source at the foot of this page.
Every formula on this siteWhat is the difference between margin and markup?
Margin is profit as a share of the selling price; markup is profit as a share of the cost. A product costing $10 and selling for $20 has a 100% markup and a 50% margin. Confusing the two is the most expensive arithmetic error in retail, and it always errs toward underpricing.
Should margin be calculated before or after VAT?
After. If your price includes VAT, that portion was never yours — you are collecting it for the tax authority. A UK seller treating a £120 inclusive price as £120 of revenue overstates margin by the full 20%.
What is a good profit margin for ecommerce?
Net margins of 15% to 25% are typical for a healthy private-label business after all fees, advertising and returns. Retail arbitrage often runs thinner and survives on volume; handmade and premium brands run considerably fatter. The number that matters is whether it survives a bad returns month.
How do I turn a target margin into a price?
Divide, do not multiply. Price equals cost divided by one minus the target margin: a £10 cost at a 40% target margin is £10 / 0.6 = £16.67, not £10 x 1.4 = £14. The multiply version gives a 40% markup and a 28.6% margin. Where percentage fees are involved the arithmetic is more involved again, because the fee scales with the price — which is what the break-even price calculator solves iteratively.
What is ROI and how is it different from margin?
Return on investment is profit as a share of the money you had to put in, which for a stock business is the landed cost of the goods. Margin measures the quality of a sale; ROI measures how hard your capital is working. A product with a 25% margin and a two-week turn is a far better use of cash than one with a 45% margin that takes six months to sell, and only ROI over time makes that visible. For self-funded importers ROI and turn matter more than margin alone.
Further reading
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Where these numbers come from
This calculator uses arithmetic rather than published rates — every figure comes from the values you enter. See the methodology page for the formulas behind it.
Page updated . Spotted something out of date? Tell us — corrections are published with the date they were made.
More on the working: every formula on this site, the full source register, what the terms mean, and how we decide what to publish. What an estimate here can and cannot support is set out in the accuracy notes.